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Teenage girl with cell phone and credit card. (Getty Images)
Teenage girl with cell phone and credit card. (Getty Images)

Financial Literacy

A financially challenged generation is slipping through the cracks Add to ...

When Brandon Walker was 19, he wanted a portable PlayStation but was short on cash. So he put it on his new credit card.

“It was Christmastime so I thought I would treat myself,” he said. “Then after I bought it, I messed up and lost my job.”

Since Mr. Walker was unable to make the payments, the debt snowballed to more than $400. He found another job and tried to pay it off. “I went to the bank, but by then they wouldn’t take the money. They said I had to go to a collection agency,” said the now-20-year-old, who is completing his high-school degree at Toronto’s Yorkdale Adult Learning Centre.

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His business teacher, David Oppenheimer, says this generation of young adults has no clue how to manage debt. “Students are in crisis when it comes to their credit cards.”

Like the majority of Canadian teenagers, Mr. Walker received no financial training in school. Although experts agree that personal-finance basics, such as how to budget, borrow, save and invest, are essential life skills, high schools are just starting to embed that into their curriculum.

A survey from British Columbia Securities Commission found that at a time when personal debt levels and housing prices are soaring to record highs, recent high-school grads are nothing but optimistic about their financial future.

The survey of more than 3,000 17-to-20-year olds, released last week to kick off Financial Literacy Month, found that the average respondent expects to be raking in about $90,000 a year by the age of 30. That is roughly three times the national average.

Almost three-quarters of those surveyed think that they will be homeowners by the same age, despite government data estimating that only 42 per cent of 25-to-29-year olds are homeowners.

The survey concluded that many students leave high school with “weak financial skills and little knowledge of the financial realities they will face,” leaving them prey to scams.

Schools are ramping up their curriculum to address this problem. As of September, some Ontario high-school students will see financial concepts such as compounding embedded in their math, literature or geography class, says Tom Hamza, president of the Investor Education Fund.

Other provinces are embracing a similar approach, which Mr. Hamza says is a good, but slow starting point. “This needed to happen 10 years ago, so it is never going to be fast enough.”

Barbara Gosse, director of saving and asset-building initiatives at Social and Enterprise Development Innovations, a non-profit organization that runs the Canadian Centre for Financial Literacy, says a big part of financial literacy is teaching kids what credit and debt will mean as they move into adulthood.

She says kids are entering cellphone and credit-card contracts blind. “They walk onto postsecondary-education campuses where they are offered credit cards and they don’t even understand that this is not their money.”

Ms. Gosse says parents also need to be pro-active and talk to their kids about money matters. “Kitchen-table conversations happen and that is where information is passed down exponentially.”

In the meantime, this year more than 100,000 high-school students will see Funny Money, a national financial literacy program sponsored by the IEF and the Investment Industry Regulatory Organization of Canada.

The brainchild of comedian James Cunningham, the Funny Money show is his attempt to make the Millennial teenager, born in the period from 1982 to 2002, think about how they spend, save and invest their money.

“Parents think this is being taught at school and schools think this is being taught at home. And we have this generation that is slipping through the cracks,” Mr. Cunningham says.

Using a hilarious routine that involved audience participation for things such as the How Broke is Your Teenaged Butt Test, the comedian had an auditorium of Toronto high-school students in stitches last week while covering decidedly unfunny topics such as budgeting, depreciation and dollar-cost averaging. (To listen to an audio clip from his show, click here.)

“What amazes me is how, in this digital age, a student who is flown in from a native reserve in Northern Saskatchewan is not all that different from a Scarborough teenager,” he says. “The Broke Test speaks to students everywhere I go.”

At least some of his message is getting through. Mr. Walker plans to invest the $50 he won in last week’s Funny Money dance-off contest. He says the Funny Money presentation will trigger some big changes. “He taught me not to spend more than what I have and also that saving now is important,” he says. “I might even try putting some of this money into a mutual fund.”



Three money tips from the Funny Money man

James Cunningham, the comedian who runs the Funny Money program in high schools across Canada, has these three money tips for teenagers:

1) Know your flow Track sources of income: Write down the amounts and where you get your money from, every time you get a paycheque, allowance, birthday money, or loan, so you can start to see just how you make money.

2) Control what you owe Before you get a credit card, think about how you are going to pay that bill. Make sure you have a part-time job or some sort of income on your own.

3) Invest some dough Stop spending all your money on cellphones, DVDs, gaming systems, clothes, makeup, shoes, etc. Put a little bit of money aside and start to save or invest it for your future. You will be amazed at how quickly it adds up.

To learn more, Mr. Cunningham suggests students check out the Get Smarter About Money website. You can find him on Twitter @funnymoneyman or on Facebook at The Funny Money Man.



Roma Luciw is the web editor of the Globe Investor personal finance site and writes for the Home Cents blog.

Follow on Twitter: @RomaLuciw

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